What if a business owns a building or other valuable assets? How can these assets be protected if the business fails or is sued?
That is another important point. The goal of the business owners should
be to title as few valuable assets as possible to their operating company.
Why needlessly lose valuable assets if their business fails or is sued?
It’s smarter to title these more valuable assets to another entity
to isolate them from the business’ creditors. These assets owned
through another entity can then be leased or licensed to the operating company.
For example, we always title our clients’ real estate separately.
For instance, if your building is titled to your business’ corporation
or LLC, the business’ creditors can then claim the building as a
corporate asset. So why expose the real estate? It’s smarter to
title the real estate to a separate limited liability company. The real
estate then remains yours, no matter what happens to your business. Similarly,
you want to title equipment, furniture and fixtures, trademarks, trade
names, copyrights, patents, domain addresses and other proprietary rights
to separate entities and then lease or license these assets back to your
operating company. Your objective is to limit the business’ creditors
to the fewest and least valuable assets. You can then sell or use these
valuable and protected assets to start another business or for your personal
profit. In any instance, they won’t be lost to your business’
creditors. That’s smart planning. But it takes foresight and a defensive mindset.